United States Treasury Secretary Janet Yellen complained about China's "overcapacity" in the production of such clean-energy goods as electric vehicles, power batteries and solar panels, on a recent trip to China.
The Joe Biden administration has been keen to frame China's "overcapacity" as a global concern, with Yellen saying that the US was hearing similar concerns from other economies such as the European Union, as it has sought to justify protectionist moves in a bid to secure the backing of labor unions in a presidential election year.
According to a release by the US Trade Representative's Office on Wednesday, it has launched a Section 301 investigation into China's maritime, logistics, and shipbuilding sectors based on a "serious and concerning" petition by national labor unions accusing China of using "unfair, non-market policies and practices" to "dominate the maritime, logistics, and shipbuilding sectors".
The very same day, the White House called for tripling the existing tariff rate on steel and aluminum imports from China. While it remains to be seen where the ongoing investigation will lead, the tariff rate on steel and aluminum would rise to 22.5 percent once the USTR follows through.
Considering the political atmosphere in an election year, the outcomes of such proceedings allow for little optimism. It is more likely than not they will further undermine the two countries' already fraught economic and trade ties.
Beijing was correct in pointing out the decisive divergence between the two sides, which lies in how to define and address what may otherwise be normal between trading partners and hence be handled without much trouble following set rules.
Calling it full of false accusations, the Chinese Commerce Ministry said the petition that triggered the Section 301 investigation lacked factual basis and runs counter to common sense economics.
It said the petition misinterprets normal trade and investment activities as being damaging to US national security and corporate interests, while blaming China for the US' industrial woes. The ministry also rightly pointed out that the US has provided hundreds of billions of dollars in discriminatory subsidies to its own domestic industries. And that multiple US studies have shown that US shipbuilding lost its competitive edge years ago due to the protectionist measures. It is because of the active participation of Chinese enterprises in market competition and their technological innovation that they now dominate the market.
The ministry thus called on Washington to return to the rules-based multilateral trading system.
In the current circumstances, however, it is proving extremely difficult for the two sides to agree on exactly what are the rules for both to follow, a state of affairs that is likely to persist until after the US presidential election as the Democrats and Republicans are engaged in their own fierce competition over who gets to occupy the White House for the next four years. It is a tug of war in which China-bashing serves as the flag on the rope.
